Sunday, June 23, 2013

For the sake of money people will risk anything

Singapore's investigation into banks was triggered by the Libor-rigging scandal last year.

HOT on the heels of the London interbank offered rate (Libor) rigging scandal comes the Singapore interbank offered rate (Sibor), the Singapore equivalent of the Libor rigging.

HSBC, Standard Chartered, JP Morgan Chase, Barclays and DBS are among 20 banks in which 133 traders tried to manipulate the Sibor, swap offered rates and currency benchmarks in the city-state, the Monetary Authority of Singapore (MAS) said in a statement recently.

For the sake of money, people will risk anything. In this case, Singapore is well known as a tough regulator, but they still dare to mess around with the Sibor. They are definitely asking for trouble.

According to South China Morning Post, MAS has censured banks for trying to rig benchmark interest rates and ordered them to set aside about S$12bil (RM30.13bil) at zero interest, pending measures to improve internal controls.

It is surprising that these traders have been caught with their pants down.

Regulators have cracked down on market players following the Libor rigging fiasco, which involved Barclays, UBS and the Royal Bank of Scotland paying fines of up to US$2.5bil (RM7.89bil).

This is why even when news emerged on punitive measures for the Libor rigging, very few people believed in its effectiveness.

MAS said it would make rigging key rates a criminal offence and bring supervision under its oversight.

To put this into process may take some time, while these market players exploit any loophole or weaknesses.

The fact that Asian banks are also involved in this Sibor rigging makes it even more unpalatable.

So far, Asian banks have remained strong amidst the financial crisis. Their reputation has remained largely untarnished, although most have been quite silent on their risk management.

Many of their Western counterparts have had to shed jobs massively and close down or downsize businesses, with some even having to accept taxpayers' money to survive.

At the same time, banks in the West became embroiled in the blame game, came under heavy fire from regulators and some even had to undergo a serious revamp of their business model.

Among the positive things happening among Asian banks is the recruitment of talent at a time of major job cuts in the Western banking sector.

But even that little positive aspect is going to be drowned by accusations of the Sibor rigging.

Manipulation of interest rates is a serious offence. Resulting from such collusion, some disruption may be seen in market movements, which may give rise to uncertainties.

Plain Speaking - By Yap Leng Kuen

Columnist Yap Leng Kuen reckons it is not always true that once bitten, twice shy.